FORMER STOCKBROKER AND HIS WIFE ORDERED TO PAY MORE THAN $1.5 MILLION FOR INSIDER TRADING

The Securities and Exchange Commission announced that on July 23, 2002, Judge Robert P. Patterson of the Southern District of New York entered final judgments granting the SEC's motion for summary judgment against Sharad Kapoor, a former stockbroker in the San Jose, California office of Merrill Lynch, Pierce, Fenner & Smith, Inc., and Kapoor's wife, Rohina Sharma. Both Kapoor and his wife now live in India. The Court found that, between September 1997 and January 1998, Kapoor and Sharma had engaged in insider trading in the securities of MCI Communications Corp., Brooks Fiber Properties, Inc., Carson Pirie Scott & Co., Inc., and Southern New England Telecommunications Corp., in advance of five merger and acquisition announcements concerning these companies.

Based on its findings, the Court permanently enjoined Kapoor from future violations of Sections 10(b) and 14(e) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3, and ordered him to pay disgorgement of $294,418.94, to pay prejudgment interest of $115,838.21, and to pay civil penalties of $883,256.82. The Court also entered a permanent injunction against Sharma based on the same statutory provisions and ordered her to disgorge $58,322.61 in trading profits, to pay prejudgment interest of $22,946.83, and to pay civil penalties of $174,967.83.

On April 1, 1998, the SEC commenced an insider trading case against Arjun Sekhri and others. Sekhri, the source of the inside information, was an investment banking associate at Salomon Smith Barney, Inc. in New York City. The SEC later amended its complaint to add defendants Kapoor and Sharma. The amended complaint alleges that, from September 1997 through January 1998, Sekhri, Kapoor, Sharma, Pratima Rajan, Amolak Sehgal, Fuad Dow, Gordon W. Cochrane, and Martin L. Thifault engaged in a highly profitable insider trading scheme by collectively purchasing call options and/or common stock shortly before six major corporate announcements. The defendants reaped total profits of approximately $2.5 million from their illegal securities transactions.

According to the SEC's amended complaint, Sekhri tipped Kapoor, whom Sekhri had known since college, and Kapoor's wife, Sharma, with inside information about five major corporate transactions involving MCI Communications Corp., Brooks Fiber Properties, Inc., Carson Pirie Scott & Co., Inc., and Southern New England Telecommunications Corp., before these transactions were announced to the public. Sharma, Kapoor's friend Rajan, and eight of Kapoor's Merrill Lynch clients collectively bought securities in all four companies.

Sekhri, a fugitive for more than a year, was arrested on May 30, 1999, by the Australian Federal Police at the Sydney Airport. He was extradited to the United States and pled guilty to criminal charges of insider trading. Sekhri was incarcerated, and later deported to India after he had completed his criminal sentence. Dow, Cochrane, and Thifault have previously settled the SEC's insider trading charges by consenting to the entry of final judgments requiring, among other things, payment of almost $2 million. They also pleaded guilty to criminal charges of insider trading in related criminal actions.